Exploratory

FACTOR ANALYSIS

Prepared by: Dr Gurjeet Kaur

IIM, Amritsar
 MEANING

 The clusters of large correlation co-

efficients between subsets of variables
measuring same underlying dimensions
are known as factors (Field 2003).
 Factor Analysis is a multivariate
statistical technique in which variables
that correlate highly with a group
cluster together to examine
interdependent relationships (Hair
et.al.1995).
 OBJECTIVES

 To simplify a set of data by reducing

a large number of measures for a set
of respondents to a smaller
manageable number of factors
(Foster 2002, Field 2003);
 To identify the underlying structure
of the data in which a large number
of variables measure a small number
of basic characteristic of the sample
(Hair et.al. 1995).
 SAMPLE SIZE

 The number of respondents

should not be less than 100 and
there should be at least twice as
many respondents as variables
(Foster 2002);
 Preferably the sample size
should be 100 or larger (Hair
et.al. 1995).
 Guidelines for
Factor Analysis

K-M-O Measure of Bartlett’s Test of

Correlation Matrix Sphericity
Sampling Adequacy
 ASSUMPTIONS
 Visual inspection of correlations greater
than 0.30;
 Bartlett’s test provides the probability
that the correlation matrix has
significant correlations among at least
some of the variables;
 Sampling adequacy quantifies the
degree of inter-correlation among the
variables and appropriateness of factor
analysis (Hair et.al. 1995).
 COMMUNALITY

The amount of variance a variable

shares with all other variables
included in the analysis is known
as communality
 STEPS INVOLVED

 Analyze
 Data Reduction
 Factor…
 Descriptives
 Extraction
 Rotation
 Scores
 Options
 DESCRIPTIVES

 Univariate descriptives provide

means and standard deviations for
each variable;
 Co-efficient produces correlation
matrix;
 Significant levels produce a matrix
indicating the significance value of
each correlation;
 Determinant is vital for testing
multicollinearity;
 DESCRIPTIVES
 Reproduced option produces a
correlation matrix based on the
model rather than the real data;
 Kaiser-Meyer-Olkin measure of
sampling adequacy determines the
appropriateness of the sample size;
 Bartlett’s test of sphericity examines
whether the population correlation
matrix resembles an identity matrix.
 K-M-O MEASURE OF
SAMPLING ADEQUACY
The measure interpreted by
Hair et.al. (1995)
Above 0.90 Marvelous
0.80 to 0.89 Meritorious
0.70 to 0.79 Middling
0.60 to 0.69 Mediocre
0.50 to 0.59 Miserable
Below 0.50 Unacceptable
 How many Factors
to be Extracted???

Percentage of
Eigen Value Scree Plot Variance
Explained
 EXTRACTION
 Principal Component Analysis is used when
the primary concern is to determine the
minimum number of factors that will account
for maximum variance in the data;
 Eigen value represents the total variance
explained by each factor;
 Unrotated factor solution is useful in
assessing the improvement of interpretation
due to rotation;
 Scree plot is a useful way of establishing how
many factors should be retained in an
analysis.
 Types of Rotation

Orthogonal/ Oblique
Varimax
 ROTATION

 Varimax is a method of rotation that

minimizes the number of variables with
high loadings on a factor, thereby
enhancing the interpretability of the
factors;
 Rotated factor matrix assists in
identifying which factors are associated
with which of the original variables;
 Factor loading is the correlation between
a factor and a variable.
 FACTOR SCORE

 In Regression method, factor

loadings are adjusted to take
account of the initial correlations
between variables;
 Bartlett method produces scores that
are unbiased and correlate only with
their own factor;
 Anderson-Rubin method produces
factor scores that are uncorrelated
and standardized.
 OPTIONS

 In exclude cases list wise, any subject

with missing data for any variable is
excluded;
 In exclude cases pair wise, a subject’s
data are excluded only from calculations
for which a datum is missing;
 Sorted by size arranges factor loadings in
a descending order;
 Suppress absolute values less than a
specified value ensures that factor loading
within that limit are not displayed in the
output.
 FACTOR VARIANCE
EXPLAINED

The amount of variation explained

by each factor by squaring each
factor loading for each factor,
summing them and dividing the
result by the number of variables.